Mike Qaissaunee, a Professor of Engineering and Technology at Brookdale Community College in Lincroft, New Jersey, shares his experiences and perspectives on integrating new technologies in and approaches to teaching and learning. ~ Subscribe to this Blog

Does Amazon Need to Open Stores?

Amazon's business model is a model of confusion. Their
business is really three businesses: eRetailing (what Amazon calls
EGM: Electronics and General Merchandise), publishing, and cloud
services.

According to Amazon's 10K
filing, EGM currently accounts for 60% of the business. And that's
precisely where the big trouble lies.

Recent indications are that Amazon has reached a tipping point. For
2011, Amazon's net income was a paltry $631 million on net sales of
$48 billion. Compare this to 2010's net income of $1.152 billion on
$34.2 billion in net sales. Basic earnings-per-share has gone from
$2.58 (2010) to $1.39 (2011).

Basically, Amazon has become a logistics company without wheels. To
survive in its present form, it badly needs to acquire an Airborne
Express (except that AE has already been acquired by DHL), or maybe a
railroad and a package delivery company. Ideally, it also needs to
acquire a payment-processing system (a PayPal). Why not just admit the
obvious? Amazon needs to acquire eBay.

The alternative is to join the long list of department stores that
tried to be all things to all customers (and ended up broke).

Amazon claims it will enjoy greater efficiencies (going forward) by
opening more fulfillment centers and putting pressure on suppliers.
But their story, frankly, is starting to sound old and is (how shall
we say?) at this point painfully unconvincing. Inefficiencies are
rising faster than efficiencies, at Amazon. That's what the numbers
show. And that's the real point.